September 14, 2021

Power sector revenue declines by 4.54% to N176.27bn in Q2’21

National Grid

By Obas Esiedesa

Gross revenue of Nigeria’s electricity market declined by 4.45 per cent in the second quarter of 2021, Q2’21, to N176.27 billion against N184.27 billion generated in the first quarter, Q1’21, latest data from the sector has shown.

The data from the Power Sector Working Group, however, showed that the N360.54 billion generated in the first half of this year was 24.57 per cent higher than the N271.96 billion generated in the last six months of 2020.

A monthly analysis of the power sector financials in the first six months of 2021 showed that revenue has been fluctuating month-on-month.

A total of N64.98 billion was generated in January, but revenue, however, fell by 13.30 percent in February to N57.35 billion.

Further analysis showed that revenue in March rose by 7.41 per cent to N61.94 billion but declined again in April by 8.76 percent to N56.955 billion.

In May, revenue rose by 8.24 per cent to N62.07 billion. It however fell in June to N57.25 billion, a drop of 8.42 per cent.

FG explains shortfall

In a note to Energy Vanguard, the Power Sector Working Group blamed poor power supply as well as glitches for the fall in revenue in the second quarter especially in the month of June.

“June is a bit short due to glitches in the sweep mechanism and a low energy supply (there were gas payment challenges we have been working on).

“Through the collection discipline via CBN there is full visibility to DisCos collections. Collections over the past six months have stabilized at between N57 to N65 billion.

“The regulator and policymakers are focusing in the second half of the year on boosting electricity and rolling out phase 1 of Mass Metering to boost supply to reduce tariff and increase collections.

“Procurement is being completed for most of the CAPEX interventions that will help boost supply”, the group added.

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Earlier, the group disclosed that the Federal Government has concluded arrangements for the commencement of the second phase of its metering program tagged National Mass Metering Program which it expects to drastically reduce estimated billing by DisCos, that will ensure consumers are billed appropriately for the electricity they consume by installing meters free of charge in household and business premises that are currently unmetered.

The Federal Government provided funding for the program through loans from the Central Bank of Nigeria, CBN, to DisCos.

“Meters are provided to customers free of charge. This is indeed unprecedented and has so far led to the tremendous success recorded so far”.

Expert tasks new Minister on sector’s reform

Speaking on how to grow the electricity market, a leading power sector expert and Managing Director of Target Energy Ltd, Abdullahi Umar harped on the need to review some of the policies that may be hampering growth and development in the power sector.

Mr Umar said at the weekend that the new Minister of Power, Engr. Abubakar Aliyu needs to conduct a thorough review of the sector.

“I am part of those stakeholders who are of the view that the declaration of the transitional electricity market (TEM) in February 2015 was too ambitious and premature.

“What should have been was a phased transition into TEM or at the minimum a testing of the market before the full declaration of TEM.

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“The errors of such declaration have continued to plague the power sector with a heightened liquidity crisis in 2016 and 2017, that saw a drastic decline of the revenue flows in the power sector, DisCos remittance went from 70 per cent to a sharp decline averaging about 28 per cent – 30 per cent for that period,” he said.

He pointed out that July 2021 saw the end of Eligible Customer Regulation in the Nigeria Electricity Supply Industry (NESI), adding that the decision by the Nigeria Electricity Regulatory Commission, NERC, to rescind the ECR, has sent mixed signals across the board.

Mr Umar further stated that “we have seen the accusations and counter-accusations between the generating companies (GenCos) and distribution companies on the issue. The action by NERC has signalled the lack of preparedness of the market to accommodate direct sale between market players.

“It is a case of willing seller, willing buyer and an unwilling infrastructure; the market cannot accommodate any distortion at this time especially as the grid still operates at average capacity.”

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The ECR allows GenCos and Independent Power Producers to bypass the Bulk Trader for excess un-contracted capacity within their portfolio and sell directly to eligible customers who can take a minimum of 2MW of power monthly.

“The ECR was issued on the 6th of November 2017 by the then Minister of Power, Works, and Housing Barr. Babatunde Fashola, Umar also averred that the “recent repeal of the ECR further demonstrates the weakness in the NESI and the need for more effective and consistent regulation.”

He further advised, “With a new Minister of Power in the saddle, I suggest that a cue is borrowed from the former Minister of Power, Work, and Housing; who commenced his tenure with sector-wide stakeholder consultation and monthly review meetings, it is important that new Minister of Power gets a proper briefing with all market participants in the same room to curtail self-serving suggestions and recommendations.”

“The frequent policy conflict is fast eroding the little gains of the NESI since the declaration of TEM and plunging the sector deeper into uncertainty.

“The new Minister of Power must pursue sector-wide collaboration and effective corporate governance to move the sector forward.

“It is time to go back to the drawing board,” he concluded.

The Nigerian Electricity Regulatory Commission has however denied that it has ended or suspended the Eligible Customer Regulations which allowed power generation companies, GenCos, to supply electricity directly to large demand customers.

NERC in a statement by its General Manager, Public Affairs Department, Dr. Usman Abba Arabi stated that the Eligible Customer Regulations has not been suspended and at no time has the Commission issued a directive for discontinuation of service to any customer.

The Commission explained that what it suspended was the unauthorized direct supply by GenCos to big consumers.

Vanguard News Nigeria